Cryptocurrencies are here to stay.
In fact, the cryptocurrency prices of the world’s most famous cryptocurrency, Bitcoin, hit a record high of $65,000 in 2021.
If you’re considering buying into the hype, here are some mistakes to avoid when you buy cryptocurrency (or invest in anything) so that you don’t run into issues, buy it at a fair cryptocurrency value, or get taken advantage of:
Not doing enough research
You might be thinking:
● “I’m not an expert in this stuff, so how can I know what to look for?”
● “Everything sounds like a scam. It’s too much to take in!”
Well, you don’t have to be an expert or even understand all the technical jargon.
You just need a basic knowledge of the industry and company and an understanding of what makes something credible or not. And if it still seems too overwhelming, there are plenty of websites out there that will do all the work for you.
Whether you buy crypto with a credit card or any other mode of payment, it’s important to do your research. You should take the time to understand the blockchain and cryptocurrency value in which you’re investing.
Don’t just buy based on hype or fear from someone else. It’s also important not to store cryptocurrencies on an exchange wallet unless you absolutely have no other choice (more on this later).
If that’s the case, make sure that at least one of those coins is a stablecoin such as Tether (USDT), USDC, TrueUSD, or DAI, as these are more reliable than others like Bitcoin Cash (BCH) or Ethereum Classic (ETC).
Not taking the time to understand the blockchain and/or cryptocurrency you’re investing in
It’s important to understand the blockchain and cryptocurrency you’re investing in before investing. The more you know about the technology, the more confidence you can have about your potential investment.
● Understand how the blockchain works.
● Understand how cryptocurrency markets work (if applicable).
Some cryptocurrencies are used as currencies that can be spent or exchanged for goods and services, while others provide access to specific features of a project or network (like voting rights).
If possible, try using some of these coins as payment methods before investing—they may be worth much more than their face value!
● Take time to review risks associated with your investment (including volatility) and rewards (in case there are any). This can help you determine if now really is an ideal time for yourself financially to make smart decisions based on facts rather than emotions.*
Buying based on hype or fear
Don’t buy cryptocurrency based on hype. This is one of the biggest mistakes you can make when investing in cryptocurrency because it will lead to a loss of money and frustration.
When Bitcoin was first released, it was described as being “a new electronic cash system that’s completely decentralised with no server or central authority.”
People who invested in Bitcoin at this time were likely extremely excited about its potential uses for cryptocurrencies and their revolutionary technology, so much so that they were willing to invest far more than they could afford.
If you do decide to invest based on fear or hype (and we strongly discourage this), make sure that you are doing your research first before making an investment decision.
Storing your cryptocurrency on an exchange wallet
When you buy cryptocurrency, it’s important to store it in a secure place. If you aren’t familiar with how cryptocurrency works and how to manage your digital assets, then we recommend using a hardware wallet.
Exchange wallets are not as secure as hardware wallets because they are often hacked and used to steal funds from users. They can be used to buy and sell crypto but cannot send or receive crypto from other exchanges or wallets due to their centralised nature.
Trading too much and burning yourself out in the process
Don’t let it happen to you. The cryptocurrency markets move quickly, and everyone wants to be in on the action.
When you’re trading cryptos, don’t make a trade that you don’t understand, or worse still, one that you don’t have the time to monitor (and revoke if needed). Make sure that any decisions you make won’t disrupt your life too much; otherwise, it might be better not to make them at all!
In crypto investing – just like anywhere else – you can win big or lose big.
Don’t put more than what’s comfortable into cryptocurrencies until they show themselves profitable enough for long-term investments such as these; otherwise, all your hard work might end up feeling like an exercise in futility once things go south for whatever reason (and there are plenty of reasons).
It is important to make informed decisions when you purchase cryptocurrency. Never invest more than you can afford to lose.
You need to do your homework before you purchase cryptocurrency. If something sounds too good to be true, it probably is.